Effects of declining unit fuel costs on energy-thrift investments

During the decade preceding 1985, unit energy costs increased annually. Consequently the financial performances of proposed energy-thrift programmes were assessed on the assumption that fuel prices would rise. However, in 1985, unit prices slumped, and have recovered only partially since then, so bringing into question the viabilities of some of the programmes implemented prior to that year. A typical hospital energy-thrift programme, consisting of 18 proposals, has been subjected in theory to a series of unit energy cost reductions. The outcome of the programme is assessed using a net-present-value technique and the public-sector discount rate of 5%. It is concluded that unit energy costs would have to be reduced by 68% before the programme as a whole would lose its viability, thus indicating that the majority of hospital energy-thrift programmes implemented during the mid-1980s have remained financially viable.